Systems Thinking and Housing Policy

I read Thinking in Systems by Donella Meadows a while back and it keeps coming to mind when I think about NYC’s housing crisis.

The Intuitive Solution

Rent stabilization and construction regulations seem like no-brainers—lower rents, better buildings. Who could argue against that?

But complex systems respond to incentives, not intentions.

What Actually Happens

When the economics don’t work, developers invest elsewhere. Construction slows. Supply falls behind demand. Rents go up for everyone outside the stabilized pool. Apartments sit empty because owners can’t justify renovation costs under current rules.

The policy meant to help affordability ends up strangling supply.

The Enforcement Problem

To change a complex system, you have two options:

1. Enforce compliance — but what enforcement capacity do you need for thousands of independent actors?
2. Create incentives — so they solve the problem because it’s in their interest

Direct cash assistance to low-income renters would help people in need without the negative side effects of price controls. The money goes where it’s needed, and the market continues to function.

A Recent Example: Broker Fees

New York recently made it illegal to charge broker fees to tenants. The idea was to reduce the upfront cost of renting.

Here’s what actually happens: if you were paying $1,000 in rent and giving $150/month equivalent to the broker, you’ll now pay $1,150 in rent to the landlord.

Why would landlords give you a discount? In a city with endemic housing shortage, they have no reason to. The cost just moves from one line item to another.

Not understanding how markets work, and making policy anyway.

The Double Standard

None of this is controversial among economists and urban planners.

• When politicians ignore doctors, we call it anti-science.
• When they ignore climate scientists, denial.
• When they ignore economists and urban planners, it’s just politics.

Not sure why.